Why Products Fail In the Digital World

Prashant Kulkarni

4 Sep, 2015 

http://swarajyamag.com/biz/why-products-fail-in-the-digital-world/

Prashant Kulkarni teaches economics, a digital economy and globalization at a leading B-School. His area of interest lies in dissecting resource contestations and human behavior at the intersections of digitization, urbanization and globalization. 

What Apple Maps, Windows Vista, Google Plus etc could have done differently

High profile failures like Apple Maps, Google Glass, Pets.com, Windows Vista, Apple Watch, GeoCities, and Google Plus, etc. are not unusual. On the other hand, success stories like Android, YouTube, Whatsapp!, Instagram seem outcomes of acquisitions than internal development. Inquisitiveness leads us to explore probable causes of digital product failure. If for Henry Chesbrough, failure to escape the clutches of traditional innovation paradigm is the cause, Geoffrey Moore attributes it to the inability to cross the ‘chasm’ implying failure to bridge the gap between early adopters and its diffusion with masses. 

Too Early or Too Ahead of Times

The late 1990s saw the rise of ‘dotcom’ firms. It seemed prefix ‘e’ propelled firms into the club of high valuations. Nonetheless, very few succeeded. The reason quite often is neither inability in understanding business nor the viability of business models. They simply were ahead of times. Pets.com, an online retailer for pet food, found that consumers were not ready to purchase pet food online. The firms bet on certain changes in consumer behavior but erred in gauging the rate of change of preference formation. Firms like Geocities, Pets.com, and Boo.com, etc. too experienced similar results. 

Imprisoned in ‘Status Quo’

Businesses often are imprisoned in the temperament developed for a specific ecosystem. Living in an echo-chamber placing faith in status-quo, rapidly changing currents make them vulnerable. Habitually, there appears an experimenting fringe player disturbing the equilibrium. Disruptive innovation whether as telephone unseating telegraph, and in recent times, near redundancy of Encyclopedia Britannica in the times of Wikipedia or textbook publishing industry wedged in the whirlpool of digitization seemingly indicate temperament entrenched in ivory tower as a source of failure. 

Myopic Vision

Pioneers often do not visualize the wide ranging possibilities the product offers. An early example was American rural farming communities adopting rudimentary telephone infrastructure as tool for broadcasting. Email and SMS services both stemmed as internal necessities soon evolving into mass markets influencing the way we communicate and organize our professional and personal lives. The internet too evolved inorganically frequently as a haphazard response to situations than a planned counterpoint to business or social stimulus.

Entrepreneurs view ecology through the prism of what they feel comfortable rather as what it is, recurrently missing the forest for the trees. Monitor 110 which was supposed to index the entire financial information on the web got carried away by market expectations delaying the eventual release. By the time it finally released, lot of water had flown down the rivers that it simply succumbed to failure in meeting market expectations.

Lack of Positioning

Apple introduced ‘Newton’ handheld personal digital system in 1993. Though an underperformer, the roots lay in imperfectly chosen positioning. Given the high price (nearly $1000) it found very few buyers in a market crowded with seven different firms by 1995. Positioning strives to achieve a distinct identity for the product in the consumer’s mind relative to competitors. Yet firms fail in identifying this distinct message. Contrary to targeting users, Newton was positioned towards sectors and verticals like architects or healthcare, etc. 

Insufficient Homework

Microsoft Vista and Apple Maps were high-profile launches and equally high-profile collapses. Microsoft forecasted nearly half its customer switching to premium version of Vista, yet nothing remotely of the sort materialized. Vista’s problems both in compatibility and performance reflected poor homework either due to glossing over or premature release or conceivably a belief of possible fixes post launch. Apple Maps became notorious for wrong information and coordinates. Railway stations were shown on water and schools and malls were shown far off from the location signifying shoddy piece of work. Both instances resulted in furious reactions leading to abandonment. To Apple Newton, poor homework aggravated the concerns of wrong positioning. 

Inability to Understand Consumer Needs

Critics contend Apple Watch was an ambitious attempt to create a luxury ‘playtoy’. The argument boils down to the motivations to purchase an Apple Watch. Some reviews pointed out the possible futility of spending around $500 in saving few seconds to glance the screen for time. The wearable industry might have hoped for revival, although the price-utility equation apparently was unsettling. Furthermore, unlike other Apple offerings, user experiences seem underwhelming, despite being the first big smart-watch in the market. Few pointed out to difficulty in mastering the functionalities with some suggesting it needed around three days. Apparently, Apple failed to gauge user requirements and comfort. Complexities might endear geeks but is unlikely to impress the masses. Furthermore, slow running apps, low battery life, confusing interface etc. exacerbate the woes. 

Threat of Cannibalization

In a series of legal battles, David Sarnoff (Sarnoff) of RCA deposed AT&T to emerge as leader of the Amplitude Modulated (AM) radio industry. Troubled by technical inefficiencies, Sarnoff asked Edwin Armstrong to find solutions, the outcome being the development of Frequency Modulated (FM) radio. However, FM endangered AM driven network threatening potential cannibalization and thus huge investments. Sarnoff opened multiple fronts ensuring FM remained confined to the periphery eventually culminating in the tragic suicide of Armstrong. It was to be many years before FM made a comeback. New products potentially can upstage and cannibalize the cash cows. Given the legacy investments, rather than exploiting new technologies, at times, managers seek recourse to stifling the newer technologies restricting them to fringes.

Lack of Differentiation

Microsoft launched Zune to counter iPod. Yet, Zune hardly ruffled any feathers slipping into oblivion. Google Plus attempted to rival FaceBook, yet fell on the wayside. Despite being challenged by Google Buzz, Twitter’s popularity remained undiminished. Very few were aware of Buzz’s existence. These instances characterize a failure to differentiate from the first movers. Little reason existed for switching to Zune worsened by the apparent incompatibility with iTunes. Aside from the lack of user-friendly interfaces, Google Plus simply attempted to be a clone for Facebook in the network externalities driven market. Moreover, as Facebook moved to mobile, Google Plus failed to leverage the same. 

Inability to Cross the ‘Chasm’

Google Wave perceivably attempted developing a new paradigm of online collaboration. Yet in its brief life, it was unable to break into the mass market. In an archetypal innovation model, early adopters are followed by the early majority followed by diffusion towards the late majority and finally the skeptical laggards. Bridging each gap is not a continuum but a series of discrete events. Products may attract the attention of early adopters but fail to cross Moore’s ‘chasm’ spreading into the early majority. Apple Watch too apparently fails to cross this chasm. As Moore demonstrates, products suffer dip in sales at a certain point of time reflecting the chasm they encounter. Delicious, Digg, Friendster, Xing, Macintosh are some examples of unsuccessful attempts to transit from niche early adopter to mass driven early and late majority markets.

Network Externalities

Sony Blu-Ray became the preferred format for DVDs over Toshiba HD because of the support it received from major studios with the exception of Warner. Since DVD adoption is linked to compatibility, this was a plus for Sony which also had advantages in terms of features offered. Similar battles for standardization of video tape formats between Betamax and VHS through the early 1980s, resulted in the triumph of the latter as the pre-eminent format. Both Toshiba HD and Betamax suffered from network externalities thus suffering mortality. 

Inability to Understand New Markets

Sony introduced eVilla, an internet appliance, cheaper than personal computer in the early 2000s. Yet, it sole functionality was providing access to internet. However, with PCs being generative, buyers ignored eVilla. Barnes and Noble could not translate its success in the physical world to the online world because of its inability to realize the online world is a different proposition and not merely new platform for selling physical products. Microsoft Bob intended to be a program manager for Windows was simply unappealing to the consumers or maybe it was too ahead of times. 

Negative User Reviews/ Negative Feedback Loops

Netflix revolutionized the entertainment world by exponentially increasing the assortment of movies hitherto unavailable in Blockbuster stores. Keen to leverage the streaming segment, it spun off the streaming component into Qwikster, away from the parent firm. User reaction was furious. More than seventy thousand tweets condemned the launch or made fun of the new spin-off. The increase of subscription fees for streaming plus DVD mailer thus incentivizing customers to choose streaming services aggravated the matters. The rising customer defections ensured spin-off did not last even for a month. 

Product success is an outcome of interplay among several dynamics. Few are within the control of the firms, have the ability to do sufficient homework, timing of release, ability to understand changing cross currents. At times maybe customer reactions are not easy to predict, yet the firms need to find ways of managing the reactions. High costs of innovation accompanied by shrinking shelf life often makes a thin line between success and failure requiring vigilant and pointed thinking on the part of firms.